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Challenges in Collections for Common Interest Communities – Part 2
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Challenges in Collections for Common Interest Communities – Part 2

| Sep 28, 2018 | Firm News

By:  Ronald J. Barba

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What are you collecting and Why does it matter?

Collections cases can vary depending on the nature of the assessments being collected.  The most straight forward case involves unpaid common charges.  There are other cases which require more documentation than an account statement before an action can be commenced.  Cases involving the collection of fines present challenges unique to Boards and their attorneys.  CIOA is very strict in its requirements involving the levy and collection of fines.  Connecticut General Statutes Section 47-244 states that an association board may levy fines only after the owner has been provided notice of the violation and an opportunity to be heard.  There are no exceptions to the law.  Therefore, it is incumbent upon a Board to ensure that no fine is assessed against a unit owner prior to providing notice and scheduling a hearing for the offending unit owner.
Failure to follow the notice and hearing requirements of CIOA renders the collection vulnerable to attack.  Courts are not willing to award associations for their failure to provide unit owners with basic due process.  The subject of proper rules and enforcement would certainly take up a full article.  Suffice to say that failure to follow the basic requirements of §47-244 will meet with defeat in the courtroom.

Go back to Zero.

When a unit owner is referred to association counsel for collection it is important that the arrearage be a reliable reflection of the owner’s account.  One way to ensure that counsel has reliable figures is to provide an account statement which goes back to a point in time when the owner’s balance was zero.  Showing a balance forward is extremely troublesome for the court when establishing the collectible debt at the time of judgment.  Providing a “zero balance” statement can be a problem for associations that have recently transitioned from one property management company to another.  While most companies are professional and accomplish the transfer of records in a timely and reliable manner, some leave incomplete records of payments resulting in account statements starting with a balance.  Boards should be aware of this possibility when entering into new management contracts so that the contracts include provisions mandating the transfer of complete documentation.

Transfer charges.

Speaking of property managers…Increasingly, accounts that have been turned over to counsel for collection include a “transfer fee” payable to the property manager.  These charges are appropriate as long as they are provided for in the management contract.  It might be a good idea to include notice of transfer charges in the collection policy as well.

Set it and forget it.

Once an owner’s account has been referred out to the Association’s attorney for collection, it is best for the board not to involve itself in the matter.  Too often, owners will reach out to sympathetic board members seeking relief from the collection effort.  With the best intentions, Boards will veer from established collection protocols and thereby render the collection vulnerable.  Some Boards accept partial payments without communicating as much to counsel.  Such activity exposes association counsel to Fair Debt Collections Practices claims which can be costly.
Boards must keep in mind that they have retained counsel to deal with this very delicate and difficult issue. Permitting their attorneys to handle the collection eliminates the stress of direct confrontation with the unit owners.  Allowing counsel to collect the arrearage is the most efficient avenue toward resolution.  That is not to say that counsel will not and should not communicate debtor requests.  Trying to manage the intricacies of Connecticut’s collection laws is best left to professionals.  Once the account has been referred to counsel let it be resolved by counsel.  A good lawyer will communicate with his or her board and provide regular updates.  The merits of requested payment plans and other special dispensations can be discussed fully by attorney and client in executive session.  If a board wishes to modify its position about a particular account, it will have ample opportunity to do so.   A board should expect a periodic status of collections report from its counsel.  Such a report will keep the board apprised of the progress (or lack of progress) in the various collection matters being prosecuted.

Join us next week for the third and final part of  Challenges in Collections.